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March 13, 2012

EBRI: Workers’ Biggest Concerns Are Job Security, Debt Levels

While only 14% of workers are very confident that they’ll have the money to retire, workers say the more pressing concerns of job security and mounting debt are taking precedence over retirement concerns, according to the Employee Benefit Research Institute’s 2012 Retirement Confidence Survey, released Tuesday.

Americans’ confidence in their ability to retire comfortably is stagnant at historically low levels–with just 14% of workers saying they are “very confident” they can retire comfortably–which the EBRI survey says is statistically equivalent to the survey low of 13% measured in 2011 and 2009.

“In 2012, from polling done just two months ago, we find overall retirement confidence this year is statistically unchanged: It has leveled out–no better or worse than last year–but this plateau is at historically low levels,” Jack VanDerhei, EBRI research director and co-author of the report, told reporters on a conference call to announce the survey results. “Americans’ retirement confidence has plateaued at the lowest levels we’ve seen in two decades of conducting this survey.”

The survey was conducted in January through 20-minute telephone interviews with 1,262 individuals (1,003 workers and 259 retirees) age 25 and older in the United States, using random digit dialing along with a cell phone supplement to obtain a representative cross section of the U.S. population.

The survey, co-sponsored by The Principal Financial Group, found that workers in debt have the least confidence in retirement security, and that workers' current worries about job security and debt overshadow their long-term planning for retirement. Forty-two percent of workers identify job uncertainty as the most pressing financial issue facing most Americans today.

Many workers report they have virtually no savings and investments, the report found, and workers’ expected age of retirement continues to rise. However, despite the fact that the percentage of those saving for retirement continues to decline, with many respondents reporting virtually no savings and investments–the report notes that Americans are saving for retirement in employer-sponsored retirement savings plan, such as a 401(k), with 81% of eligible workers (38% of all workers) saying they contribute to such a plan with their current employer.

The survey data show that retirement confidence levels are measurably higher (20% to 30%) among workers who’ve taken “positive financial actions,” including saving in an employer-sponsored plan, getting advice from a financial professional and calculating retirement savings needs.

Workers who currently contribute to an employer-sponsored retirement savings plan were more than twice as likely as those who do not to report savings and investments of at least $50,000, according to VanDerhei. This is also reflected in their overall confidence, as 64% of those who are currently contributing money to an employer-sponsored retirement savings plan are either very or somewhat confident that they will have enough money to live comfortably throughout their retirement years, as opposed to only 48% of those who do not.

While many workers think they’ll be able to work longer in their careers, Mathew Greenwald of Greenwald & Associates, which conducted and co-sponsored the survey, said that some are certain to be disappointed: “Nearly half of current retirees surveyed by the [retirement confidence] report left the work force earlier than they planned for reasons beyond their control, such as health or economic changes such as job loss.”

Among the other major findings in the survey include:

Concern about health costs: Worker confidence about having enough money to pay for medical expenses and long-term care expenses in retirement remains well below their confidence levels for paying basic expenses.

Little savings: Many workers report they have virtually no savings or investments. In total, 60 percent of workers report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.

Workers’ expected retirement age: Twenty-five percent of workers in the Survey say the age at which they expect to retire has changed in the past year. In 1991, 11% of workers said they expected to retire after age 65. By 2012 that has grown to 37%.

Retirees’ experience: Regardless of retirement age expectations, and consistent with prior Retirement Confidence Survey findings, half of current retirees surveyed say they left the work force unexpectedly (due to health problems, disability, or changes at their employer, such as downsizing or closure).

Reliance on Social Security: Retirees report they are significantly more reliant on Social Security as a major source of their retirement income than current workers expect to be.

Expected vs. actual pension income: Although 56% of workers and/or their spouses expect to receive benefits from a defined benefit plan in retirement, only 33% report that they and/or their spouse currently have such a benefit with a current or previous employer.

Not calculating retirement needs: More than half of workers (56%) report they and/or their spouse have not tried to calculate how much money they will need to live comfortably in retirement.

Online technology: Only a minority of workers and retirees feel very comfortable using online technologies to perform various tasks related to financial management. Relatively few use mobile devices such as a smart phone or tablet to manage their finances, and just 10% of workers who use online technology say they are very comfortable obtaining advice from financial professionals online.